Gevo Inc (NASDAQ: GEVO) has had a strong start to the year. Since January 4, the stock has climbed more than 300%, from $4.33 per share to more than $13 per share. The most recent analyst weighing in on the stock suggested more gains are to come too.
So, what’s the deal? Why is GEVO so exciting?
Skip to What You Want to Read
- What Does Gevo Do?
- Why Now Is the Time for the Company to Shine
- The Most Recent Analyst Opinion Is a Positive One
- Risks to Consider Before Buying GEVO Stock
- Final Thoughts
What Does Gevo Do?
Gevo is a renewable fuels company that’s focused on taking traditional crops like corn, waste wood, and other materials, and turning them into traditional fuels that we use every day, like gasoline and jet fuel.
These fuels are developed not only to be renewable, but to provide a way to use the traditional transportation model (I.E. fuel up, turn the key, drive), without harming the delicate environment around us.
The company’s fuels are clean-burning, and efficient, yet solve some of the big issues we face today:
- Global Warming. Global warming is a major concern. The world is working to make a push toward clean energy. Because transportation is such a major driver of the carbon emissions created around the world, alternative fuels and transportation methods that provide clean alternatives to today’s market norm are necessary. GEVO fits that bill with its clean fuels.
- Distance. Electric vehicles aim to solve much of the problems Gevo is working to solve, but they have one big issue themselves. It takes hours to charge an electric vehicle, and most can’t go more than a couple hundred miles on one charge. So, for road trips and those that travel often, electric vehicles simply aren’t a good fit. Well, there are gas stations everywhere, and when GEVO fuels run low, all the driver needs to do is fill up the tank, just like with traditional fuels, making it a clean-transportation option with much more utility than electric vehicles.
- Tradition. As human beings, we’re creatures of habit. We know that when we want to operate our vehicles, we add fuel, turn the key, and go. Change is a difficult concept for us, which likely plays a major role as to why electric vehicles only account for about 2% of vehicles on the road. Nonetheless, Gevo fuels offer consumers an ability to operate their vehicles in ways they traditionally would, without having to contribute to the global climate change issues.
To put it all together, Gevo has developed a clean fuel technology that could very well result in the company becoming a cornerstone in the shift to clean transportation.
Why Now Is the Time for the Company to Shine
Gevo has been on the right path for some time now. The technology it developed has been in testing, and in commercial use for years as it followed a slow-growth path to success, and it has indeed seen many successes, including billion dollar contracts surrounding the supply of its renewable fuels.
However, if there’s ever been a time for the company to shine, now is it.
Joe Biden is now the President of the United States. That’s an important statement for GEVO. You see, Biden has a clean energy agenda that’s bigger than anything we’ve ever seen. Moreover, with democrat control over Congress and the Senate, getting his plans pushed through the legislative process could be pretty simple.
As a result, Joe and his colleagues are likely to pass legislation in favor of clean energy companies and those that use their products. We’re talking tax cuts, government grants, increased demand due to consumer facing tax cuts, and more. All of which bodes well for GEVO.
The bottom line here is simple, with regulatory changes that are likely coming down the line, the company is in the right place at the right time, and demand is likely to climb. But, GEVO knows that.
In fact, the company just closed on an offering that brings $341 million+ through the doors. That’s no chump change, and the company intends on using these funds for the development of a new production facility as well as other general working purposes.
So, knowing that changes are coming down the line, GEVO is working hard to ramp up production in order to meet the strong demand that’s likely ahead.
To put that into perspective, buying GEVO now, before clean fuels really take hold, would be like buying Amazon.com when it was building out its infrastructure to take control over a budding e-commerce market.
The Most Recent Analyst Opinion Is a Positive One
Most recently, an analyst at Noble Capital Markets weighed in on GEVO stock, lifting the price target on the stock from $8.25 per share to $16 per share. The analyst, Poe Fratt, pointed to the closing of the offering as a positive, stating that it will bring the company’s total in pro forma cash to more than $500 million.
Fratt went on to explain that following the offering, the company has the money in the bank to cover the construction of two net zero (zero carbon emission) plants for the development of clean fuels.
That’s right, analysts at Noble smell what Gevo’s cooking, and they like it!
Risks to Consider Before Buying GEVO Stock
Risk is an ever present reality in the world of investing, and to say that GEVO doesn’t come with any would be a blatant lie. As much as I like the stock, and believe that we’ll continue to see compelling growth, there are risks to consider before diving in. These risks include:
- Hiccups In Infrastructure Buildout. For GEVO to be successful, it has to build out its infrastructure to meet the massive demand that’s likely ahead. If the company has any issues in this buildout process, we could see declines in the stock.
- Consumer Adoption Issues. Gevo’s fuels are something new to most people, and getting the masses to adopt something new comes with significant challenges. Should the company fail to excite consumers about its clean-burning, renewable fuels, sales could flop, leading to significant declines ahead.
- Profitability Issues. GEVO now has more than $500 million in cash on its books. However, the company isn’t producing a profit, and much of that money is earmarked for the expansion of production capacity. Should the company run out of funds before it reaches profitability, it may move forward with a new dilutive offering, leading to declines.
The bottom line here is simple. Investing comes with risk. If you’re not comfortable with that, well, you shouldn’t be investing. Nonetheless, there are few companies on the stock market that I believe have the growth potential we see at Gevo.
At the end of the day, the political climate is ripe for change, GEVO is ramping up production and improving infrastructure to take advantage of that change, and gains are likely ahead. All in all, GEVO stock is one that’s hard to ignore!